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New home lending remains at lowest levels in over two decades, HIA reports


New home lending in Australia remains at its lowest level in more than 20 years, despite a slight increase in February 2024, according to the latest Lending to Households and Businesses data released by the Australian Bureau of Statistics (ABS).

HIA Chief Economist Tim Reardon stated, “The number of loans issued for the purchase and construction of new homes increased by 3.6 per cent in February compared to the previous month. Despite this rise, lending to build and purchase a new home remained 3.6 per cent lower in the three months to February 2024 than at the same time last year.”

Reardon emphasized that this downturn in lending for home building is more severe and prolonged than any other period observed in the past two decades. He attributed the primary cause of this poor result to the rise in the cash rate, which has compounded the impact of increased construction costs due to elevated land, labour, and material prices.

The slowing in lending is most evident in New South Wales and Victoria, where new home lending has fallen by more than one-third since interest rates were raised in May 2022. Reardon added that overly restrictive macroprudential rules have further exacerbated the situation.

The HIA Chief Economist concluded, “The slowing in home building activity appears set to continue and will drag on economic growth through the rest of this year.”

In original terms, the total number of loans issued in the three months to February 2024 for the construction or purchase of new homes rose in Western Australia by 28.2 per cent compared to the previous year, followed by South Australia (+6.7 per cent) and Queensland (+0.5 per cent). The other jurisdictions saw declines in new home lending, led by the Northern Territory (-34.3 per cent), Tasmania (-31.8 per cent), the Australian Capital Territory (-27.9 per cent), New South Wales (-12.4 per cent), and Victoria (-5.9 per cent).

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